In a volte face and after intense lobbying, the government has agreed to allow affected farms and businesses to benefit from the standard transferable allowance approach used elsewhere in the inheritance tax (IHT) regime and strangely left out of its reforms.

Any unused £1m allowance for the 100% rate of agricultural property relief (APR) and business property relief (BPR) will be transferable between spouses and civil partners, including if the first death was before 6 April 2026. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.

This change marks a minor simplification of the legislation as it brings the rules in line with the existing IHT rules for the nil rate band and residence nil rate band, both of which are transferable.